July New Home Sales Plunge to 9-Month Low

July New Home Sales Plunge to 9-Month Low

08/23/2013 BY: MARK LIEBERMAN, FIVE STAR INSTITUTE ECONOMIST

Despite improving builder confidence, sales of new single-family homes dropped to their lowest level since last October, the Census Bureau and HUD reported Friday.

The seasonally adjusted annual rate of sales dropped a stunning 13.4 percent to 394,000 in July. Economists surveyed by Bloomberg expected June sales to drop to 487,000 from June’s originally reported 497,000. June sales were revised to 455,000.

The median price of a new home, according to the Census/HUD report, slipped 0.5 percent in July to $257,200. June’s median price was revised to $258,500 from the originally reported $249,700.

The number of new homes for sale rose to 171,000 in July—the highest level since April 2011, and the months’ supply rose to 5.2—the highest since January 2012—from 4.3 in in June.

The month-over-month decline in sales was the largest percentage drop since sales fell 33.4 percent in May 2010 as the federal homebuyer tax credit ended.

The report came on the heels of a third consecutive monthly increase in the Housing Market Index compiled by the National Association of Home Builders (NAHB). The index, seen as a measure of builder confidence, has improved 34 percent in the last three months, registering above 50 (on a 100 point scale), which is considered a positive reading. The index had been below 50 for 85 straight months—more than seven years—from April 2006 until May 2013.

According to the NAHB survey, buyer traffic—one of the survey components—is up 46 percent in the last three months at 45, its highest reading since November 2005, when it was 46.

That traffic has not turned into sales, however. The Census/HUD report revised downward sales for April, May, and June, lopping off an average of 23,000 from the originally reported sales pace for each month.

The report for July showed a slight shift to higher-priced homes as houses priced at $500,000 or more accounted for 11 percent of July sales, up from 9 percent in June. Homes priced at $300,000 or less represented 62 percent of all July sales, down from 64 percent in June.

In the last three months, higher-priced homes represented an average of 9 percent of all sales, down from 13 percent in the previous three months. Sales of homes priced at $300,000 or less represented an average of 62 percent of all sales in the last three months, up from 60 percent in the previous three months.

The average price of a new home slipped $12,400 in June after falling $29,400 in May—the largest monthly decline since August 2008, when the average price fell $36,400. The average price has also dropped in three of the last four months.

The median price of a new home has fallen for three straight months and in all but two months this year. Nonetheless, the median price in July was $19,800 (or 8.3 percent) above the median price a year ago.

The average price in July, $322,700, was up $20,500 from June and $40,400 (14.3 percent) since July 2012.

The new home sales report tracks contracts for sale, not closings, and as such is comparable to the Pending Home Sales Index (PHSI) compiled by the National Association of Realtors (NAR). The NAR will release its July PHSI next Wednesday.

The surge in homes on the market came in the same month in which, according to a separate Census/HUDreport, builders completed 571,000 single family homes—177,000 more than they sold.

Regionally, sales fell month-over-month in all four Census regions in July. The sales pace fell to 213,000 in the South in July from 246,000 in June. In the West sales dropped to 94,000 —the slowest sales pace since March 2012—from 112,000 in June. The sales rate in the Midwest dropped to 54,000 in July from 62,000 in June, and in the Northeast, sales fell to 33,000 in July from 35,000 in June.

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